Briefly:
Intraday trade: Our Friday's intraday trading outlook was bearish. It proved wrong because the S&P 500 index gained 0.8% following higher opening of the trading session. The S&P 500 index reached our intraday stop-loss level of 2,580. There have been no confirmed negative signals so far. On the other hand, we still can see some short-term overbought conditions. Therefore, we prefer to be out of the market today, avoiding low risk/reward ratio trades.
Our intraday outlook is neutral today. Our short-term outlook is neutral, and our medium-term outlook is neutral:
Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral
The main U.S. stock market indexes gained between 0.1% and 2.2% on Friday, as investors reacted to better-than-expected tech stocks quarterly earnings releases. The S&P 500 index has reached new record high at the level of 2,582.98, around 5 points above last week's Monday high. The Dow Jones Industrial Average was relatively weaker than the broad stock market, as it gained just 0.1%. It remained slightly below its October 24 all-time high of 23,485.37. The technology Nasdaq Composite was relatively stronger, as it reached new record high at the level of 6,708.13, following daily gap up. The nearest important level of support of the S&P 500 index is at 2,575-2,580, marked by previous level of resistance. The next support level remains at 2,565, marked by recent local lows and local highs. The support level is also at 2,545-2,550, marked by last Wednesday's daily low, among others. On the other hand, potential resistance level is at around 2,600. The S&P 500 index extended its over eight-year-long bull market on Friday, as it reached new record high closer to 2,600 mark. Will bull market continue? Or is this some topping pattern ahead of downward reversal? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions:
Mixed Expectations Following Friday's Rally
Expectations before the opening of today's trading session are slightly negative, with index futures currently down between -0.1% and -0.2% vs. their Friday's closing prices. The European stock market indexes been mixed so far. There will be no new important economic data announcements today. Investors will wait for more quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday consolidation, following Friday's rally. The nearest important level of resistance is at around 2,580, marked by Friday's new all-time high. On the other hand, level of support is at 2,565-2,570, marked by some recent local highs. The next support level is at 2,550-2,555, marked by recent consolidation. The futures contract trades along its new record highs. It is now slightly below its short-term upward trend line, as we can see on the 15-minute chart:
Nasdaq At New Record High
The technology Nasdaq 100 futures contract follows a similar path, as it trades along Friday's record high. The nearest important level of resistance is at around 6,220. On the other hand, support level is at 6,200, and the next level of support is at 6,130, marked by local highs, among others. The Nasdaq 100 futures contract trades along new record high following Friday's rally, as the 15-minute chart shows:
Let's take a look at Apple, Inc. stock (NASDAQ:AAPL) daily chart (chart courtesy of http://stockcharts.com). The price broke above its week-long consolidation on Friday. Will it continue higher ahead of quarterly earnings release on November 2? Potential resistance is at around $165, marked by previous high. Is this a new uptrend or just upward correction?
The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index fluctuates following its recent rally, despite Friday's tech stocks rally. The market remains close to new record high. We still can see clear technical overbought conditions. We can say that something (i.e. individual asset, entire market, technical indicator) is overbought when its value rises so high that (according to the technical analysis) it’s unlikely to advance even further. Generally, an overbought market is a sign that a downward correction is likely to occur. Traders use indicators such as Relative Strength Index (RSI), Stochastic Oscillator, Money Flow Index to identify overbought conditions. For example, one can view a given market as “overbought” if the RSI indicator for this market is above 70:
Concluding, the S&P 500 index continued its bull market on Friday, as it broke above Monday's record high. Will uptrend continue this week? There have been no confirmed negative signals so far. However, we still can see medium-term overbought conditions along with negative technical divergences.